2013 annual report portrait 2 - amazon...

Past Board Chairs (1973-2012) ....... 2

Board Chair’s Message .................... 3

President & CEO’s Message ............. 4

Past Corporate Leadership .............. 5

Board Members (1973-present) ...... 6

Board of Directors ............................ 7

Corporate Employees ...................... 8

Goldbelt Interns ............................. 10

MD&A .............................................. 12

Auditor’s Report ............................. 15

Balance Sheet ................................. 16

Statement of Operations ............... 17

Equity .............................................. 18

Cash Flows ...................................... 19

Notes to Financial Statements ........ 20

Subsidiaries .................................... 34

Additional Employees .................... 35

Table of Contents

Joseph E. Kahklen1973, 2005-2009

Joseph G. Wilson1974-1980

Clarence Antioquia1981-1983

Niles Cesar1984

Marcelo Quinto Jr.1985-1987

Carl C. Nelson2000

Randy Wanamaker2001-2003, 2010

Walter Johns2004

Karen A. Taug2011-2012

Josephine Armstrong1988-1991

Richard A. Beasley1992-1993

Robert Martin Jr.1994-1995, 1998-1999

Delfin Cesar1996

Alberta Aspen1997

Chairman of the Board - 1973 to 2012

2013 Goldbelt Annual Report - Page 3

In 2014, Goldbelt, Incorporated reached its 40th year of operations. As we celebrate this anniversary, we revisit our successes and all the challenges along the way that have formed Goldbelt into the multi-million dollar corporation it is today.

We also look back with gratitude at our elders who fought so hard for the lands claims settlement; our board members, past and present, whose vision helped shape our corporation; the employees who have served Goldbelt throughout the years and whose dedication and hard work built our foundation; and finally, the shareholders who continue to serve as the corporation’s purpose and mission.

In 1974, at the inception of Goldbelt, the corporation had 2,722 original shareholders. Today, we have grown to more than 3,500 shareholders who are located throughout the United States and even abroad. Your board and management team continue to focus on business growth, diversification, and prospects that will provide opportunities and benefits for our shareholders. We are ever mindful that the decisions made in the board room reach across the spectrum of our shareholder population.

In this year’s election, shareholders are being asked to vote on an important resolution. The Goldbelt Ancestral Trust Resolution will establish a settlement trust that will be created as a separate legal entity from the corporation, and therefore, will be protected from the ever-changing tides of the business world.

Over time, we are confident that the Trust will grow to provide a variety of benefits including: dividends, scholarships, and funeral assistance. In January, the Board unanimously voted in favor of the Trust. For the sake of our children, grandchildren, and future generations of tribal shareholders, we ask each shareholder to vote “Yes” for this resolution.

As we move forward, we recognize that the Trust will take several years to grow before it will be in a position to start generating benefits. In the meantime, the Board and Management remain committed to our cultural preservation and educational support through the Goldbelt Heritage Foundation. We will also continue to seek out ways to increase the employment of our shareholders and descendants through Goldbelt’s Internship Program and our commitment to shareholder hire.

Finally, in honor of our 40th anniversary, the Board would like to dedicate this annual report to all of those who have worked to make Goldbelt the strong, vibrant, and visionary corporation that it is today.

Gunalchèesch.

Katherine EldemarChairman of the Board


I am very pleased to write this letter to you as President & CEO of

Goldbelt, Incorporated at the time of the company’s

fortieth anniversary. Many companies don’t make it

to forty. Goldbelt has not only made it, but is in strong financial

condition to boot. As our Chief Financial Officer has pointed out in the management discussion of this report, we now have been profitable for ten years.

2013 was another good year for Goldbelt, Incorporated, though not as good as 2012. Net income for the year is down about $1 million from $5 million in 2012 to $4 million. However, in light of sequestration, budget cuts and general uncertainty with regard to government spending, the results are decent. Nevertheless, they are not what we want to see longer term. We need to resume growth in revenue and net income in order to achieve our ambitious goal of reaching $500 million in revenue by 2017.

In that regard, we are aggressively pursuing new opportunities and investing in business development for our government contracting companies. We are also at the outset of resuming Goldbelt’s acquisition of commercial real estate that was curtailed a number of years ago. We are targeting triple net real estate (where the tenant pays maintenance, tax and insurance expenses, as well as the normal expenses such as electricity and utilities). Possible tenants include companies like FedEx. For diversification reasons, the properties would be located outside of Alaska. Funding for our initial purchase has already been set aside in an investment fund.

Within Alaska, our largest initiative is to bring our geoduck project from the experimental stage to the actual production of this high-valued clam for the Chinese and other markets. We hope to have a business plan completed in the not too distant future for the Investment Committee and ultimately Board of Directors review and approval. Efforts to date have shown that geoducks can be successfully grown on intertidal sites such as Hobart Bay, much like they are successfully grown on hundreds of acres in the Puget Sound region.

In downtown Juneau, we continue to invest in the

renovation of the Goldbelt Hotel and improvements and maintenance at the Goldbelt Mount Roberts Tramway. These and other projects will keep us busy throughout the coming year. But without question the most significant Goldbelt initiative for 2014 is the establishment of an ANCSA Settlement Trust (to be known as the Goldbelt Ancestral Trust). Establishment of this Trust will require shareholder approval at our annual meeting on June 7, 2014.

This Trust will be a separate legal entity and its assets will not be available to creditors of Goldbelt, Incorporated should any problem develop at the corporation. The law requires that the assets of the Trust be invested in passive investments in the spirit of protecting those assets from the risks involved in active businesses. However, no investment is absolutely failsafe and all have some level of risk.

Funding of the Trust will come from Goldbelt, Incorporated and the purpose of the Trust will be threefold: distributions for beneficiaries, scholarships, and burial assistance. It will take considerable time for adequate funding to be available as the principal of the Trust must be built up over time and benefits from the Trust should be from income only. Benefits from income (as opposed to trust principal) will be tax free to beneficiaries.

One concern that has been expressed is that the Trust will diminish benefits from Goldbelt, Incorporated. There is no plan to significantly change benefits from the corporation while the Trust principal is being grown to adequate size, a process that will take many years. Think of it as a long-term savings plan. Much more information on the Trust is available in the Ancestral Trust Proxy Statement and online at goldbelt.com.

Finally, we are saying farewell to our long-term Vice President and CFO, Vic Scarano. Vic devoted his life at Goldbelt to advancing the cause of Goldbelt shareholders. He will be missed and we wish him the best in his next adventure.

We all very much appreciate the honor of working for you, the Goldbelt shareholders. We are all proud of this company and we want it to always be a company that you can be proud of too.

Gunalchéesh.

Robert LoisellePresident & CEO


Corporate Leadership - 1974 to 2012

Murlin “Mike” EversonExecutive Director

1974

Joseph G. WilsonPresident

1974-1980, 1989-1994

Joseph E. KahklenChief Executive Officer

1980-1987

John BlackInterim CEO1987-1989

Mark RichardsonInterim President

Feb-May 1994

Joseph M. BeedlePresident & CEO

1994-1999

Gary DroubayPresident & CEO

1999-2011

Elliott “Chuck” WimberlyInterim President & CEO

2011-2012


Board Members - 1973 to Present

Clarence Antioquia 1980-83Josephine Armstrong 1978-93Alberta Aspen 1988-96Catalino Barril, Jr. 1974-84, 1986-93Richard A. Beasley 1987-96, 2012-PresentJoseph Bennett, Sr. 1973-74Sandra J. Borbridge 1974-75Delfin “Del” Cesar 1992-2013Niles Cesar 1980-87Ben Coronell 2006-PresentDerek Duncan 2009-10John Eldemar 1973-74Katherine Eldemar 1988-97, 2010-PresentMurlin “Mike” Everson 1975-80Lenora Florendo 1987-93Charles Gamble 1974-77Margaret Gamble 1973-74, 1988-92Lori M. Grant 2013-PresentPercy Hope 1973-80Myron Igtanloc 1980-83Lawrence Jackson, Sr. 1975-1980Walter Johns, Jr. 2000-2006Antionette K. Jones 1984-87

Joseph E. Kahklen 1973-80, 1997-2000 2002-PresentAndrea Cadiente-Laiti 1997-2012Robert W. Loescher 1974-80, 2005-08Robert Martin, Jr. 1983-87, 1993-2002James Mason 1994-97Edith McHenry 1998-2010Alfred McKinley, Sr. 1973-74Chris McNeil, Jr. 1980-87Carl C. Nelson 1973-74, 1987-2004Margaret Nelson 1988-89, 1990-93Raymond Paddock, Jr. 1974-82June Pegues 1974-87Kathryn Polk 1997-2009, 2010-PresentMarcelo Quinto, Jr. 1980-90Ventura Samaniego, Jr. 1986-88Trudy Skan 2004-PresentAndrew Sutton 1974-75Joe Tagaban 1973-74Karen A. Taug 2008-PresentRandy Wanamaker 1993-PresentDorothy Webster 1994-97Joseph G. Wilson 1973-1989Dorothy Zura 1996-2005


Richard A. Beasley Benjamin D. Coronell Katherine Eldemar

Lori Grant Joseph E. Kahklen

Trudy Skan Karen A. Taug Randy Wanamaker

Kathy Polk

Officers:

ChairmanKatherine Eldemar

TreasurerRichard A. Beasley

Vice ChairRandy Wanamaker

Corporate SecretaryTrudy Skan

Board of Directors

Victor R. Scarano Vice President &

Chief Financial Officer

Derek DuncanVice President

Alaska Operations

Elliott WimberlyVice President

Medical & Defense Services Group

Joseph T. LoCasaleVice President

Facility & Engineering Group

Tina CloydDirector of Human

ResourcesAlaska Operations

Lisa FisherDirector of Finance

& Accounting

Lisa-Marie IkonomovDirector of Corporate

Communications & Shareholder Services

Ben JohnsonDirector of Information

Technology

Corporate Employees

Frank WatsonVice President

Technical Services Group

Joann FloraDirector of Tourism

Marketing

Barbara Fujimoto8(a) Compliance

Manager

Neely PerisichHuman Resources Specialist

Norman FloodExecutive Assistant

Tesla CoxShareholder Services

& Corporate Communications Assistant

Judy MasonLands Technician

Woan Woan LevinAccounting Technician

Angel FujimotoHuman Resources

Assistant

Arlene AlcanciaPayroll Technician

Kristopher Ahlen, Construction ServicesFacility Support Services - Gibsonia, PA

Miranda Barril, Fine Arts ArchivistGoldbelt, Incorporated - Juneau, AK

Caleb Bradford, Human ResourcesGoldbelt, Incorporated - Herndon, VA

Aubrey Briscoe, AccountingGoldbelt, Incorporated - Herndon, VA

Macayla Cloyd, Records ManagementGoldbelt, Incorporated - Juneau, AK

Tesla Cox, Corporate CommunicationsGoldbelt, Incorporated - Juneau, AK

Christopher Day, Human ResourcesGoldbelt, Incorporated - Juneau, AK

Kaya Day, AccountingGoldbelt, Incorporated - Juneau, AK

Kristen Folger, Hospitality ManagementGoldbelt Hotel - Juneau, AK

Dillon Hall, Business DevelopmentNisga’a Data Systems - Herndon, VA

Michael Loescher, Information TechnologyGoldbelt, Incorporated - Juneau, AK

Ian McClure, Business DevelopmentGoldbelt Wolf - Alexandria, VA

Hunter Meachum, Administrative SupportMount Roberts Tramway - Juneau, AK


2013 Interns

Annual Report: The document that Alaska Native corporations must publish and make available to its shareholders. Contains detailed financial information concerning the company’s operations and finan-cials for the preceding year. This report gauges the corporation’s financial performance.

Management Discussion and Analysis (MD&A): The MD&A section is where the chief financial officer (CFO) speaks to the financial trends of the corpora-tion and compares the corporation’s performance to those years prior.

Balance Sheet: Weighs assets against liabilities and shareholder’s equity. The equity of the company must be equal to its assets minus liabilities and own-ers equity. The balance sheet is a good indicator of a company’s financial position.

Consolidated Statements of Operations (Income Statement): The income statement is where the term “bottom line” comes from. This statement demon-strates the net income, or total profit of Goldbelt. This statement is also used to determine earnings per share or net income per share. The formula for net income, or profit is revenues minus expenses equals income.

Revenue: Any money made through sales, contract-ed services, tourism, real estate, or any other opera-tion.

Expense: Costs associated with the generation of revenue.

Statement of Cash Flows: Demonstrates the corpora-tion’s inflow and outflow of cash. Cash flow is vital to a company’s success because ample cash will ensure that creditors, employees, and shareholders can be paid on time. The bottom line of a statement of cash flows is net increase (or decrease) in cash from the year prior. This is important to note because it is an indicator of the success and growth of Gold-belt. There are three separate categories in the statement of cash flows: operating, financing, and investing activities.

Operating Activities: Any activity that makes money in the short term.

Financing Activities: Flows of cash between Goldbelt, its shareholders, and creditors. Financing activities include issuing shares, paying dividends, or taking out loans.

Investing Activities: Any cash flow resulting from investments in financial markets or other Goldbelt subsidiaries.

Notes to the Financial Statements/Significant Ac-counting Policies: Directly following the financial statements, this section contains further detailed information and descriptions of long term debt, lines of credit, investments, assets, revenue, and taxes. Also included are Goldbelt’s significant accounting policies. These policies are important because they affect the recorded value of revenue, inventory, land, and many other important entries in the an-nual report.

Board of Directors: Comprised of nine shareholders that act as a representative body of the sharehold-ers. They jointly oversee company operations and make corporate management policies and deci-sions. Such oversights include: hiring and firing of executives, dividend policies, approval of budgets, and determining the compensation of executive of-ficers. The board is accountable to shareholders for the performance of the company. The board does not deal with day-to-day management decisions such as hiring and firing of employees and payroll issues. Each board member serves a three year term. Subsidiaries: Goldbelt subsidiaries include any com-pany of which Goldbelt maintains at least a 51% ownership. Many of these companies fall into the Small Business Administration’s 8(a) program, and are located outside of Alaska. Despite their location these subsidiaries produce revenue for Goldbelt and are included in the consolidated financial state-ments. Goldbelt currently has fourteen subsidiaries.


Reading the Annual ReportBy Ian Wanamaker

10 PROFITABLE YEARS AND GOING STRONGGoldbelt started off 2013 a little slowly. Sequestration was on the minds of everyone as we waited to see the outcome of the budget battle in Washington, DC. Fortunately, most of the work that we do is considered high priority so we did not see many cuts or layoffs. The Board and Management have spent a lot of time focusing on the contracting side of Goldbelt and their core strengths. We have been able to leverage that focus into a number of new start-ups which, when combined, have yielded a significant impact to the bottom line. In 2013, the contracting operations gener-ated $8,361,000 in net operating income to Goldbelt.

To mitigate the negative effects that results from scru-tiny of the 8(a) advantages enjoyed by Alaska Native Corporations, sequestration, and the press, the Board and Management set a goal to focus on competitive contracts. We compete on full and open contract proposals and are successful in part due to our com-petitive pricing, qualifications, and our reputation of getting the job done. Many 8(a) contracting entities based in Alaska who rely more heavily on sole source contracting saw an overall retraction in 2013.

Net Assets continued to grow in 2013 with an addi-tional $1.69 million being added for a total of $47.51 million. We generated $4.53 million in net income with $4.05 million attributable to Goldbelt’s interest. Total revenues for the year were $146,033,239.

ALASKA OPERATIONSAlaska operations ended the year on a mixed note. Overall we generated net operating income of $925,862 for FY ended 2013. This was behind our ex-pectations but still resulted in a positive cash flow. The question that challenges the Board and Management is whether that is sufficient. Goldbelt carries $14.6 mil-lion in long term debt, a majority of which is related to the Tram, the Hotel, and the vessel we use to transport miners to and from the Kensington gold mine. With

the contracting entities generating $8 million in net operating income and Alaska operations generating $925,862, we recognize the need to diversify and are considering ways to shift to a better balance.

We have completed the major renovation of the Goldbelt Hotel. This renovation of the rooms and com-mon areas has sparked renewed interest in the Hotel. This will increase demand which will drive rates, thus increasing our revenue opportunity in 2014. We feel good about its positioning in the market. You will see us updating the exterior in 2014 which will provide a dramatic and much needed visual face lift.

A major challenge at the Hotel in 2013 was the reno-vation during the summer season. This effectively shut down two of five floors for a good part of the summer. That shutdown impacted room availability and thus revenue. We also saw our GM transition out of Alaska which caused some upheaval but we have been lucky to find Ron Hauck, our new GM who has many years of experience in hospitality, most recently with Westmark in Sitka. We look for good things from him moving forward. The Goldbelt Hotel ended 2013 with a net loss of ($450,106) and was well behind our budget estimate for the year.

The Mount Roberts Tramway is a high profile property that had a good year in 2013. Increased cruise traffic and sunny skies had many riding the Tram for


Management Discussion & Analysis

panoramic vistas and hikes along the many trails.We were happy to have those travelers stop in for a bite to eat at the Timberline Bar & Grill and to shop in our Raven-Eagle Gift Shop.

The Tram finished 2013 with $242,725 in net income which was close to budget estimates for the year. We were ahead of 2012 numbers by $180,000. Tram management has implemented an increase in fares for 2014. In response to a study done to look for how to increase ridership, the Tram hired a Marketing Director in 2013, implemented a marketing plan, contracted with a professional merchandiser, and updated their website.Goldbelt Security saw some change in 2013. Long time General Manager Mike Tagaban retired in July 2013 and Goldbelt brought in an interim GM to help lead Security in the short term. Blair Seward was hired as full time GM in March 2014. Additionally, what was originally Goldbelt Security Services, LLC was renamed Goldbelt Specialty Services, LLC. and is certified as an 8(a) company that can be focused on government contracting. At the same time, we created a new entity called Goldbelt Security, LLC which now is the organization that handles all of the security agreements we have in place in Juneau. Goldbelt Security finished 2013 with $16,330 in net income which is behind budget projec-tions for 2013. Goldbelt Security’s management team has identified new opportunities in Juneau so we are optimistic about growing that organization in 2014. Also, Goldbelt has applied for its hub zone designation from the SBA. This will allow the company to effectively compete for certain government contracts.We have two additional entities in Juneau: CP Marine, LLC and Goldbelt Transportation, LLC (previously Alas-ka Native Tours). CP Marine has the Seadrome building and dock facility (across from the Hotel). The strategic value of this entity is in the dock facility. We are seeing increased small cruise ship traffic in Southeast Alaska. Many of those companies turnover in Juneau, which means a need for overnight accomodations at the Hotel for incoming and outgoing small cruise guests. Having the dock in such close proximity to the Hotel creates good opportunity. CP Marine ended 2013 with

a small loss of ($42,440) which was slightly better than our budget projections. Goldbelt Transportation provides transportation servic-es to the Kensington Gold Mine. It is a good partner-ship with Coeur Alaska and generates jobs and profits. Goldbelt Transportation ended 2013 with $494,292 in net income which was well ahead of projections.

GOVERNMENT CONTRACTING2013 was another very good year for Goldbelt’s government contracting. We were slightly behind the stellar year we had in 2012 but still ended the year very strong. The net operating income for 2013 was $8,361,000 and was well ahead of budget expecta-tions.We had fourteen entities in 2013 and are adding two more in 2014. These entities provide services, products or both to many different government and interna-tional clients. We also have a few of our entities that provide equipment to the government. Some are direct equipment providers while others are value added—they sell the equipment and install it. Many have become the go-to organization for clients who understand we will perform for a good price, on time, and on budget.You may have heard the phrase “low price technically acceptable” or LPTA as it related to government con-tracts. Basically that means that in a lot of instances the government is focusing on the price more than qualifications or past performance when it evaluates

various proposals. This has had a chilling effect on some organization’s margins on contracts. Some of our entities provide ser-vices to various government clients in areas that have less competition which means higher profit margins. Other entities have a heavier weighting toward product procure-ment or where LPTA is more prevalent which drives yields down. The key to success for us is managing our overall “wrap rate” or cost structure by entity.


LANDS It has been an exciting year for our lands department. We have been working on analyzing the viability of growing geoducks on our property for commercial sale. We entered into a lease with the Department of Natural Resources and have done some test planting. So far, the results look promising. Geoducks have good revenue potential for Goldbelt. Look for more to come in the future.

We also continue to see small cruise ship traffic at Ho-bart Bay. A small number of passengers disembark on the property and enjoy hiking, driving ATV’s, kayaking or boating in the bay. These operations, while not exten-sive, are helpful in offsetting some of the costs to main-tain the land at Hobart, West Douglas, and Cascade Point. Net expense for Lands was $285,231 in 2013.

EQUITY We earned overall net income of $4,532,534 with $4,047,503 attributable to Goldbelt’s ownership. Net income of $4,532,534, less $849,231 distributed to non-controlling members, less the $52,000 paid to elders, less the $1,020,750 paid in dividends to shareholders, and less the additional $921,175 equity accrual for the purchase of minority interest when added to the begin-ning of $45,817,053, resulted in $47,506,431 in equity at year end 2013. The result is an increase in equity of $1.69 million.

LIQUIDITY & CAPITAL RESOURCES Goldbelt ended 2013 with cash and cash equivalents of $10,803,678 up from $9,388,850 at the end of 2012. The bulk of the increase came from operations which provided $5,750,516. We had some cash outflows from investing which includes remodeling the Hotel and purchasing other property and equipment, purchased non-controlling interest in two of our 8(a) entities and received some distributions. Cash used in investing activities was $2,956,517. We had additional cash out-flows related to financing activities of $1,379,171. These activities included distributions to non-controllg interest, payments of distributions to shareholders, principal pay-

ments on debt and additional borrow-ings.

Goldbelt Incorporated entered into a consolidated line of credit with a financial institution either directly or as guarantor totaling $18.35 million to fund accounts receiveable. The total drawn on those lines of credit at the end of 2013 was $7,620,522 million. Nisga’a Data Systems had $2,002,527 drawn; Goldbelt Glacier Health Ser-vices had $1,657,378 drawn; Goldbelt Eagle had $1,126,462; Goldbelt Wolf had $1,125,000; Goldbelt Falcon had

$827,337 drawn; Lifesource Biomedical had $490,085; Goldbelt Specialty had $320,000; Peregrine had $70,000 drawn; and Orca had $732 drawn.

Goldbelt, Incorporated has long-term debt related to the Goldbelt Hotel, Mount Roberts Tramway, CP Marine, Goldbelt Wolf, and Goldbelt Security Services totaling $14.594 million including current portion of long term debt. $7 million of the debt is related to the Tram; $3.45 million is related to the Hotel; and $701,062 is related to Goldbelt Tours for the vessel and vehicles in support of the mine. $1.65 million of the remaining balance is re-lated to the equity buyout of minority interest at Raven; $1.33 million related to Goldbelt Specialty Services for vehicles leased to the government; and $458,550 to Goldbelt Wolf related to vehicles leased to the govern-ment.

In closing, 2013 has been a very good year. The board and management continually look for opportunity to better utilize our assets, grow revenues where it makes sense, and focus on maintaining good fiscal discipline. There are new opportunities we are working on that look promising and we have existing organizations that provide significant contributions. There are challenges that we face in the market but we have a good group of people that bring great experience to the equation which gives us confidence that we will continue our upward growth trend.


MD&A (continued)

We have audited the accompanying consolidated financial statements of Goldbelt, Incorporated and Sub-sidiaries (the Company) which comprise the consolidated balance sheet as of December 31, 2013, and the related consolidated statements of operations, changes in equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of Ameri-ca. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s prepara-tion and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appro-priateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Goldbelt, Incorporated and Subsidiaries as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally ac-cepted in the United States of America.

Other MatterThe 2012 consolidated financial statements of Goldbelt, Incorporated and Subsidiaries were audited by Mi-kunda, Cottrell & Co., Inc. who merged with BDO USA, LLP effective July 1, 2013, whose report dated March 30, 2013 expressed an unmodified opinion on those statements.

Anchorage, AlaskaMarch 29, 2014

Independent Auditor’s Report

The Board of Directors and ShareholdersGoldbelt, IncorporatedJuneau, Alaska



December 31, 2013 2012

Assets

Current assets: Cash and cash equivalents $ 10,803,678 $ 9,388,850 Accounts receivable 45,581,067 39,106,160 Inventory 376,398 337,460 Costs and estimated earnings in excess of billings 90,370 55,787 Prepaid expenses and other 1,711,636 1,891,742 Total current assets 58,563,149 50,779,999

Investment in affiliates 159,012 395,814 Equipment under operating lease, net 2,461,010 3,254,603 Property and equipment, net 34,507,632 33,654,299 Deferred income taxes 5,069,562 5,069,562 Goodwill 1,350,000 1,350,000 Other assets 2,370,832 974,161 Total noncurrent assets 45,918,048 44,698,439

Total Assets $ 104,481,197 $ 95,478,438

Liabilities and Shareholders’ Equity

Current liabilities: Lines of credit $ 7,620,522 $ 6,000,457 Accounts payable and accrued expenses 33,161,192 26,628,603 Billings in excess of costs and estimated earnings 1,502,656 2,504,674 Current portion of long-term debt 3,336,955 3,232,767 Deferred revenue 95,519 1,300 Total current liabilities 45,716,844 38,367,801

Long-term debt, net of current portion 11,257,922 11,293,584

Total liabilities 56,974,766 49,661,385

Commitments and contingencies (Note 20) Equity: Goldbelt shareholders’ equity: Common stock, no par value. Authorized 400,000 shares; issued and outstanding 272,200 shares - - Elders stock, no par value. Authorized 400,000 shares issued and none outstanding - - Contributed capital 26,825,465 26,825,465 Retained earnings 18,743,121 16,348,456 Total Goldbelt shareholders’ equity 45,568,586 43,173,921 Noncontrolling interest 1,937,845 2,643,132 Total equity 47,506,431 45,817,053

Total Liabilities and Shareholders’ Equity $ 104,481,197 $ 95,478,438

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets


Consolidated Statements of Operations

December 31, 2013 2012

Revenues: Contracted services $ 137,957,004 $ 146,763,093 Tourism 7,795,821 7,435,531 Real estate 101,771 93,295 Other 178,643 141,112 Total revenues 146,033,239 154,433,031

Expenses: Cost of contracted services 112,584,098 120,151,622 General and administrative 20,015,648 16,719,298 Tourism 4,181,473 4,143,071 Depreciation 2,354,350 2,721,929 Real estate 387,002 312,572 Total expenses 139,522,571 144,048,492

Income from operations 6,510,668 10,384,539

Other income (expenses): Interest expenses (974,573) (1,360,729) Interest income 38,037 69,530 Equity in net income (loss) of affiliates 32,074 (119,333) Other expenses (457,165) (1,632,941) Gain on sale of assets - 3,643 Other expenses (1,361,627) (3,039,830)

Income from continued operations 5,149,041 7,344,709

Gain (loss) from discontinued operations (see Note 19) (414,170) 866

Income before provision for income taxes 4,734,871 7,345,575

Provision for income taxes (202,337) (39,781)

Net income 4,532,534 7,305,794

Net income attributable to the noncontrolling interest (485,031) (2,301,890)Net Income Attributable to Goldbelt $ 4,047,503 $ 5,003,904

Net Income per Share $ 15 $ 18



Goldbelt Shareholders Non-Common Elders Contributed Retained controlling Total

December 31, 2013 and 2012 Stock Stock Capital Earnings Interest Equity

Balance at December 31, 2011 $ - $ - $ 26,825,465 $ 12,330,252 $ 1,884,051 $ 41,039,768

Net income - - - 5,003,904 2,301,890 7,305,794

Shareholder dividends - $3.50 per share - - - (952,700) - (952,700)

Distributions to noncontrolling interest - - - - (1,551,477) (1,551,477)

Contributions from noncontrolling interest - - - - 8,668 8,668

Redemption of 3,300 shares of Elders stock ($10 per share) - - - (33,000) - (33,000)

Balance at December 31, 2012 - - 26,825,465 16,348,456 2,643,132 45,817,053

Net income - - - 4,047,503 485,031 4,532,534

Shareholder dividends - $3.75 per share - - - (1,020,750) - (1,020,750)

Ownership change - - - (580,088) (341,087) (921,175)

Distributions to noncontrolling interest - - - - (849,231) (849,231)

Redemption of 5,200 shares of Elders stock ($10 per share) - - - (52,000) - (52,000)

Balance at December 31, 2013 $ - $ - $ 26,825,465 $ 18,743,121 $ 1,937,845 $ 47,506,431

See accompanying notes to consolidated financialents.

Consolidated Statement of Changes in Equity

Consolidated Statements of Cash Flows

Years Ended December 31, 2013 2012

Cash Flows from Operating Activities Net income $ 4,532,534 $ 7,305,794 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash charges and credits: Depreciation 2,354,350 2,721,929 Amortization - 492,298 Loss (gain) on sale of assets and investments 226,103 (3,643) Equity in net (income) loss of affiliates (32,074) 119,333 Changes in operating accounts providing (using) cash: Accounts receivable (6,474,907) (2,417,982) Inventory (38,938) 5,832,331 Costs and estimated earnings in excess of billings (34,583) (40,786) Prepaid expenses and other 180,106 (1,007,886) Other assets (289,964) 778 Accounts payable and accrued expenses 6,235,688 3,260,231 Billings in excess of costs and estimated earnings (1,002,018) 2,102,652 Disbursements in excess of available cash - (380,064) Deferred revenue 94,219 - Net cash provided by operating activities 5,750,516 17,984,985

Cash Flows from Investing Activities Distributions from affiliates 268,877 - Payments to noncontrolling interest (550,000) - Purchase of property and equipment (2,733,747) (866,556) Proceeds from the sale of assets 58,353 347,444 Net cash used by investing activities (2,956,517) (519,112)

Cash Flows from Financing Activities Distributions to minority interest (849,231) (1,551,477) Contributions from minority interest - 8,668 Net borrowings (payments) under lines of credit 1,620,065 (20,859) Proceeds from long-term debt 3,650,092 3,718,308 Principal payments of long-term debt (4,727,347) (14,379,801) Dividends paid (1,020,750) (952,700) Redemption of elder’s stock (52,000) (33,000)Net cash used by financing activities (1,379,171) (13,210,861)

Net increase in cash and cash equivalents 1,414,828 4,255,012

Cash and Cash Equivalents, beginning of year 9,388,850 5,133,838 Cash and Cash Equivalents, end of year $ 10,803,678 $ 9,388,850

Supplemental disclosures: Cash paid for interest $ 974,573 $ 1,360,729 Cash paid for income taxes $ 437,220 $ 435,657 Reduction in long term debt through sale of property and equipment

$ 6,328 $ 292,605

Long term debt increase due to addition of intangible asset $ 1,106,707 $ - Property and equipment acquired through long term debt $ 39,074 $ 219,465



1. History

Goldbelt, Incorporated (Company) was incorpo-rated according to the Alaska Native Claims Settle-ment Act (ANCSA). Under the terms of ANCSA (and amendments), the Company is entitled to $250,000 and the surface estate of 32,627 acres of land. The regional corporation within whose designated bound-aries the Company is located will receive title to the subsurface estate. Until developed or leased or sold to third parties, lands conveyed to the Company pur-suant to ANCSA are exempt from adverse possession and similar claims and real property taxes with certain exceptions.

Under the provisions of ANCSA the Settlement Com-mon Stock and right thereto may not be sold, pledged, or treated as an asset under Title 11. However, the stock may be transferred to a Native or a descendant of a Native in certain circumstances or by will or intes-tate succession. The stock shall carry voting rights only if the holder thereof is an eligible Native or a descen-dant of a Native.

On June 28, 1997, the Company amended its Articles of Incorporation to authorize 400,000 shares of a new class of stock. This new class of stock is referred to as Elders Stock and is nonvoting, without par value, and ineligible for payment of dividends or distributions. This stock is restricted to issuance to shareholders meet-ing the eligibility requirements of: 1) 65 years of age or older and 2) holder of Settlement Common Stock that was not obtained through gift, inheritance or pur-chase, or who transferred such Settlement Common Stock by intervivos gift. The shares cannot be sold, pledged or assigned in present or future, nor shall in-choate rights thereto, and present and future rights to receive dividends therefrom be sold, pledged or as-signed.

Each eligible shareholder of record on May 1, 1997, and shareholders becoming eligible subsequent to that date, are issued 100 shares of the Elders Stock, which are immediately redeemed by the Company for $10 per share. The redeemed shares are construc-tively retired by the Company.

The Company’s operations are geographically con-centrated in tourism in Alaska and government con-tracting with the U.S. government. As a result of these concentrations, the Company’s growth and opera-tions depend upon economic conditions of the Alaska tourism industry and spending by the U.S. government.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned sub-sidiaries, Goldbelt Hotel, LLC (Hotel), CP Marine, LLC (CPM), Goldbelt Transportation, LLC (Tours), Goldbelt Aerial Tramway, LLC (Tram), Goldbelt Security, LLC (GBS), Goldbelt Raven, LLC (Raven), CP Leasing, LLC (CPL) Goldbelt Specialty Services, LLC (GSS), Facil-ity Support Services, LLC (FSS), Goldbelt Professional Services, LLC (GPS), Goldbelt C6, LLC (C6) and their subsidiaries that are at least 51% owned. Operating subsidiary companies include, LifeSource Biomedical, LLC (LifeSource), Nisga’a Data Systems, LLC (Nisga’a), Goldbelt Eagle, LLC (Eagle), Goldbelt Wolf, LLC (Wolf), Goldbelt Cedar, LLC (Cedar), Goldbelt Hawk, LLC (Hawk), Goldbelt Orca, LLC (Orca), Goldbelt Fal-con, LLC (Falcon), Goldbelt Glacier Health Services, LLC (Glacier), and Peregrine Technical Solutions, LLC (Peregrine). All significant inter-company transactions have been eliminated in consolidation.

FSS, LifeSource, Nisga’a, Wolf, GSS, Falcon, Hawk, Glacier, and Peregrine hold 8(a) status under the Small Business Administration’s Minority Small Business Development program. The Company’s interest in these entities ranges from 60% to 100% and its share of earnings ranges from 51% to 100%. As of Decem-ber 31, 2013 CPL, Raven, Orca, Cedar and Eagle have graduated from the 8(a) program.

Management Estimates

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses for the period then ended. Actual re-sults could differ from those estimates.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, that is, other than in a forced liq-uidation or distress sale.

Notes to the Consolidated Financial StatementsDecember 31, 2013 and 2012


Accounts Receivable

Accounts receivable consist of trade accounts re-ceivable and are stated at amounts billed less any allowance for doubtful accounts. Credit is extended to customers after an evaluation of the customer’s financial condition, and generally collateral is not re-quired. Accounts are considered past due after 90 days. Management’s determination of allowance for doubtful accounts is based on an evaluation of the accounts receivable, past experience, current eco-nomic conditions, and other risks inherent in the ac-counts receivable portfolio.

Billing practices are governed by the contract terms for each project. When billings on service contracts are less than the recognized revenue, the difference is recorded as unbilled accounts receivable. Unbilled work is usually billed during the next normal billings process following achievement of contractual re-quirements.

Historically uncollectible receivables have been less than 1%, Management therefore believes all receiv-ables are collectible and has not recorded an allow-ance for doubtful accounts.

Inventories

Inventories consist primarily of materials the Company is obligated to purchase from a subcontractor in ac-cordance with contract terms. Inventory is valued at the lower of cost or market.

Investments in Affiliates

Investments in affiliates where the Company has sig-nificant influence are accounted for using the equity method of accounting, whereby the Company’s pro rata share of the earnings or losses of each investment is included in the consolidated statements of opera-tions and the undistributed earnings or losses are re-ported as in increase or decrease in the investment balance. Distributions are reported as a decrease in the investment balance when received. Equity invest-ments not accounted for under the equity method are recorded at the lower of cost or estimated mar-ket value.

Noncontrolling Interests

The Company applies the provisions of Topic 810 of the FASB Accounting Standards Codification relating to noncontrolling interests in consolidated financial

statements. This guidance requires noncontrolling in-terests to be reported as a component of equity sep-arate from the parent’s equity and purchases or sales of equity interests, that do not result in a change in control, to be accounted for as equity transactions. In addition, net income attributable to a noncontrolling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value, with any gain or loss recognized in net income.

Depreciation and Amortization

Depreciation for property and equipment is calcu-lated using the straight line method over the estimat-ed useful lives of the underlying assets. Depreciation for equipment under operating lease is calculated based upon the lease terms. Estimated useful lives by major category of fixed assets are as follows:

YearsBuildings 40Marine vessels and equipment 5-15Furniture and fixtures 3-10Production and office equipment 3-10

LandLand transferred to the Company under the terms of ANCSA that was received for other than its timber or other resources value is recorded as contributed capital at its estimated fair value on the date of con-veyance.

Land conveyed to the Company under ANCSA for its timber or other resource value is recorded at zero val-ue, in accordance with industry practice, because its fair value at the date of conveyance was not deter-minable within reasonable limits.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

Long-lived assets are reviewed for impairment when-ever events or changes in circumstances indicate that the carrying amount of an asset may not be re-coverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are con-


sidered to be impaired, the impairment to be recog-nized is measured by the amount by which the carry-ing amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Good-will is reviewed for impairment at least annually. The Company has an option to first assess qualitative fac-tors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Compa-ny determines it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill im-pairment test is unnecessary. However, if the Com-pany concludes otherwise, then the Company is required to perform the first step of the two-step im-pairment test. Under the first step, the fair value of the reporting unit is compared with its carrying value (in-cluding goodwill). If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. However, if the fair value of the report-ing unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company must perform step two of the impair-ment test (measurement). Under step two, an impair-ment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the im-plied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this al-location is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis.

The Company has an option to bypass the qualita-tive assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. The Company may resume performing the qualitative assessment in any subsequent period.

Other Assets

Other assets consist of art and intangible assets. In-tangible assets are amortized over their estimated life. Finite-lived acquired intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference between the carrying amount and the fair value of the asset.

Income Taxes

Funds received under provisions of ANCSA from the Alaska Native Fund are not subject to federal, state or local income taxes. Real property interests received pursuant to ANCSA are also not subject to income tax-es; however, income derived from the real property interests and other operations of the Company are subject to federal, state and local income taxes.

The Company and subsidiaries file consolidated fed-eral and state income tax returns. The Company ac-counts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax conse-quences attributable to differences between the fi-nancial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax benefits derived from differences between the book and tax basis of assets received under ANCSA are recorded as increases to contributed capital.

The Company applies the provisions of Topic 740 of the FASB Accounting Standards Codification relating to accounting for uncertainty in income taxes. The Company annually reviews its tax return and positions taken in accordance with the recognition standards. The Company believes that it has no uncertain tax positions which would require disclosure or adjust-ment in these financial statements.

For the year ended December 31, 2013, there were no material changes to the total amount of unrec-

Notes to Financial Statements, continued


ognized tax benefits. The Company does not expect any significant increases or decreases for uncertain tax positions during the next 12 months.

The Company files income tax returns in the U.S. and various state jurisdictions. The tax years 2009 through 2012 remain subject to examination by the tax jurisdictions.

The Company’s policy is to recognize interest and pen-alties accrued on any unrecognized tax benefits as a component of income tax expense. There is no interest or penalties accrued at December 31, 2013.

Revenue Recognition

Revenue for rental activities is recognized at the time of service or over the rental period. Revenues on long-term service contracts are recognized ratably over the term of the contract, as services are performed or based on the terms of the contracts.

Revenue related to reimbursable cost line items is rec-ognized when the applicable expense is incurred. Award fee revenue is recognized as the Company achieves performance criteria if they are objective in nature otherwise when notified of the fee by the U.S. government agency. Variances between provisional rates and actual rates are accrued if the variance is unfavorable to the Company. If they are favorable to the Company, they are only accrued when the Com-pany has the ability and intent to collect the variances.

Revenue from sales where the Company has trans-ferred all significant risk to vendors, manufactures or purchasers are recorded net of costs.

The Company recognizes revenues from long-term construction contracts on the percentage-of-com-pletion method. Under this method, the completion percentage is measured by the percentage that costs incurred to date bears to total estimated final costs for each contract. For financial statement purposes, income is determined by applying the percentage of completion, determined at the financial statement date, to the estimated final gross profit for each con-tract.

The Company utilizes this method because manage-ment believes it is the best available measure of prog-

ress on contracts. Because of inherent uncertainties in estimating costs, it is reasonable to assume that esti-mates will change in the future. When changes in job performance, job conditions, and estimated profitabil-ity occur, including those arising from contract penalty provision and final contract settlements, these chang-es may result in revision to final estimated revenue, costs, and income and are recognized in the period in which the revision is determined. Provision for esti-mated losses on uncompleted contracts is made in the period in which such losses are determined.

Contract costs include all direct labor, labor burden, material, subcontract and equipment costs, and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and depreciation costs. General and administrative expenses are charged to expenses when incurred. Profit incentives are included in contract revenue when realization is reasonably as-sured. An amount equal to contract costs attributable to claims is included in revenue only when the Com-pany has a measurable claim and the amount can be reliably estimated.

The current asset “costs and estimated earnings in ex-cess of billings on uncompleted contracts” represents contract revenues recognized in excess of amounts billed. The current liability, “billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of contract revenues recognized.

Reclassification

Certain reclassifications have been made to the 2012 financial statements to conform to the 2013 presentation.

Subsequent Events

The Company has evaluated subsequent events through March 29, 2014, the date on which the financial statements were issued.


3. Cash and Cash Equivalents

Credit Risk

The Company maintains cash balances at several fi-nancial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The cash balances in excess of FDIC insurable limits are $7,380,831 and $7,772,424 at December 31, 2013 and 2012, respectively.

4. Accounts Receivable

Accounts receivable consist of the following at December 31:

2013 2012

Billed $ 26,590,101 $ 24,465,172Unbilled 18,990,966 14,640,988

$ 45,581,067 $ 39,106,160

Historically uncollectible receivables have been less than 1%, Management therefore believes all receiv-ables are collectible and has not recorded an allow-ance for doubtful accounts.

5. Investments in Affiliates

Investments in affiliates consist of the following at December 31:

2013 2012

Investment in Eagle Facility Management Services $ 159,012 $ 159,012Investment in Joint Management Services - 236,802

Total Investments In Affiliates $ 159,012 $ 395,814

Eagle Facility Management Services

Eagle Facility Management Services (EFMS) was formed between one of the Company’s subsidiar-ies and EG&G Technical Services, Inc. on October 22, 2003, for the purpose of making a proposal to the Department of Energy National Energy Technology Laboratory operation services project and to perform the project if awarded. The Company’s interest in the joint venture is 51% and its share of net loss was $0 and $5,066 for the years ended December 31, 2013 and 2012, respectively. EFMS will be dissolved in 2014.

Joint Management Services, LLC

Joint Management Services, LLC (JMS) was formed between one of the Company’s subsidiaries and the Bionetics Corporation on December 28, 2007, for the purpose of proposing, negotiating, and perform-ing up to three specific or limited-purpose business ventures. The Company’s interest in the joint venture is 51% and its share of net income was $32,075 and $119,063 for the years ended December 31, 2013 and 2012, respectively. The Company received a distribu-tion of $268,877 and $2,561 in 2013 and 2012, respec-tively. JMS’ sole contract ended January 31, 2013 and the members plan to dissolve JMS in 2014.

6. Equipment Under Operating Leases

Equipment under operating leases primarily repre-sents vehicles leased to agencies of the U.S. govern-ment. Depreciation expense is included in cost of service for government contracts. The components of the net investment in equipment under operating leases consists of the following at December 31:

2013 2012

Cost of equipment under operating leases $ 8,283,883 $ 8,411,379Less accumulated depreciation 5,822,873 5,156,776

Equipment Under Operating Leases, Net $ 2,461,010 $ 3,254,603



7. Property and Equipment

Property and equipment, at cost, consists of the following at December 31:

2013 2012

Aerial tramway and buildings $ 19,557,086 $ 19,417,185Land and land improvements 16,729,544 17,734,183Commercial and residential buildings 9,720,906 8,554,204Operating and office equipment 3,861,336 3,659,004Land transportation equipment 1,899,734 1,812,818Furniture and fixtures 1,769,491 1,022,845Marine vessels and equipment 969,482 969,482Construction in progress 113,645 1,345

54,621,224 53,171,066Less accumulated depreciation 20,113,592 19,516,767

Property And Equipment, Net $ 34,507,632 $ 33,654,299

Real estate held for investment purposes, which is part of property and equipment, consists of the following at December 31:

2013 2012

Land acquired under the ANCSA and held for investment or development:

Land on West Douglas, 1,402 acres $ 6,506,000 $ 6,506,000Land near Echo Cove, 1,382 acres 5,370,600 5,370,600

$ 11,876,600 $ 11,876,600

8. Costs and Estimated Earnings on Contracts in Progress

Work in progress on uncompleted contracts at year end consists of the following at December 31:

2013 2012

Costs incurred on contracts in prog-ress to date $ 16,317,701 $ 22,370,397Estimated earnings to date 1,050,275 1,399,954Contract revenue earned to date 17,367,976 23,770,351Less billings to date 18,780,262 26,219,238

Contract Revenue Adjustment Re-quired To Reflect Percentage Of Completion $ (1,412,286) $ (2,448,887)

This contract revenue adjustment is included in the accompanying balance sheet under the following captions at December 31:

2013 2012

Costs and estimated earnings in excess of billings on uncompleted contracts $ 90,370 $ 55,787

Billings in excess of costs and estimated earnings on uncompleted contracts (1,502,656) (2,504,674)

$ (1,412,286) $ (2,448,887)


9. Other Assets

Other assets consist of the following at December 31:

2013 2012

Intangibles $ 1,424,676 $ 61,183Investment in film 574,201 574,201Artwork 371,955 338,777

$ 2,370,832 $ 974,161

During 2013 one of the intangibles related to a con-tract asset increased $1,106,707. The increase was in accordance with the purchase agreement at Note 13.

10. Goodwill

In January 2009, the Company executed an agree-ment to purchase the minority member’s interest in Goldbelt Raven, LLC. The total amount to be paid was contingent on the profitability of existing con-tracts. See footnote 13 for a complete explanation. The purchase resulted in a contract asset related to the backlog of the existing contracts and goodwill. The portion of the purchase related to goodwill was $1,350,000. The contract asset is amortized over the life of the contracts and analyzed for impairment based upon the actual profitability. Amortization ex-pense for the year ended December 31, 2013 and 2012 was $0 and $492,298, respectively. Amortization expense is included on the statement of operations under the “other expense” line.

11. Lines of Credit

The Company and subsidiaries maintained multiple lines of credit. The lines of credit with amounts out-standing are:

2013 2012

Line of credit with a financial institution to $7.6 million sub-ject to the borrow-ing base, bearing interest at LIBOR plus 3.00%, (3.19% at 12/31/13), guaran-teed by the Com-pany, maturity date of June 30, 2014 * $ 3,980,638 $ -

Line of credit with a financial institution to $20 million sub-ject to the borrow-ing base, bearing interest at LIBOR plus 2.75%, floor of 3.00%, (3.00% at 12/31/12), guaran-teed by the Com-pany, matured prior to December 31, 2013* - 6,000,457

Lines of credit with financial institutions to $11.75 million bearing inter-est at LIBOR plus 3.00%,(3.19% at 12/31/13), secured by various assets guaranteed by the Company, maturity date of June 30, 2014 3,639,884 -

$ 7,620,522 $ 6,000,457



*The line of credit is shared among the Company. The Company has set individual limits for each subsidiary. Amounts available for advances on the line are lim-ited to an amount determined by specific criteria of accounts receivable and costs incurred on uncom-pleted projects including:

• 90% of eligible accounts receivable owed by the United States itself, or any department, agency or instrumentality of the United States

• Plus, 80% of all other eligible accounts receiv-able

• Less, receivables aged greater than 90 days

• Less, receivables from related parties

The combined borrowing base for all companies was $15,825,508 as of December 31, 2013. In connection with the line of credit financing agreement, the Com-pany has agreed to comply with certain financial cov-enants. The Company is in compliance with all restric-tive covenants as of December 31, 2013.

The Company also maintains a letter of credit for $350,000, which is pledged to the State of Alaska, in connection with a tidelands lease that the Company has obtained from the Department of Natural resourc-es of the State of Alaska. The project is not complete but the letter of credit serves as a source of funds that the State could use to restore the tidelands to its natu-ral state at the termination of the lease.

12. Long-term Debt

A summary of long-term debt at December 31 follows:

2013 2012Note payable to a

financial institution, principal and interest at 6.5%, due in month-ly payments of $58,333 through December 2023, secured by Aerial Tramway with a depreciated cost of $9,882,073 $ 7,000,000 $ 7,700,000


financial institution, principal and inter-est at 4.930%, due in monthly payments of $42,720.32 through April 8, 2023, the Bu-reau of Indian Affairs has provided a 90% Guarantee for the note and provided an interest subsidy equal to the difference be-twen the lender’s in-terest rate and 2.625%, secured by a building and equipment with a depreciated cost of $8,050,132. $ 3,448,715 $ -

Note payable to a related party, interest at 7.00% with monthly payments of $61,632, maturity date no later than June 30, 2016 guaranteed by the Company, see Note 13 for explanation for increase 1,653,217 1,214,822

Note payable to a financial institution, principal and inter-est at the five year U.S. Treasury securities rate plus 2.50%, due in monthly payments of $43,839 through December 1, 2015, the note was paid in full during 2013 - 1,435,656



financial institution, interest at 3.75%, due in monthly payments ranging from $117,361 to $111,458 through December 2014, secured by certain vehicles of GSS with a depreciated cost of $1,980,164 $ 1,333,333 $ -

Note payable to a financial institution, principal and interest at 5.77% with various monthly payments and due in monthly payments of $59,570 through July 30, 2012 and a single payment of $726,249 on June 30, 2014, secured by certain designated equipment of GSS with a 2012 depreciated cost of $1,800,113, the note was paid in full during 2013 - 1,290,492

Note payable to a financial institution, principal and inter-est at 6.25%, due in monthly payments of $8,603 through Janu-ary 11, 2021 secured by certain marine vessel of Tours with depreciated cost of $1,137,349 701,062 776,564


financial institution, principal and interest at 4.98%, with various monthly payments and due in monthly payments of $22,069 through December 30, 2012, and a single payment of $523,580 on December 30, 2013, secured by certain designated equipment of GSS with a 2012 depreciated cost of $1,017,553, the note was paid in full during 2013 $ - $ 629,148

Note payable to a financial institution, principal and interest at 3.5% due in monthly payments of $5,720 through May 1, 2024, secured by building with depreciated cost of $281,730, the note was paid in full during 2013 - 594,227

Note payable to a financial institution, principal and interest at 5.41%, with various monthly payments and due in monthly payments of $10,560 through November 30, 2012, and a single payment of $88,611 on November 30, 2014, secured by certain designated equipment of GSS with a 2012 depreciated cost of $309,487, the note was paid in full during 2013 - 215,454



2013 2012Notes payable to a

financial institution, principal and inter-est at 7.50%, due in monthly payments of $2,799 through March 1, 2017, and a single payment of $49,995 on April 1, 2017, se-cured by certain des-ignated equipment with depreciated cost of $125,316 $ 129,935 $ 152,838

Note payable to a financial institution, principal and inter-est at 7.50%, due in monthly payments of $3,027 and a single payment of $66,866 on June 15, 2015, secured by certain equipment of Wolf with a depreciated cost of $107,265 111,159 138,046

Note payable to a financial institution, principal and inter-est at 8.61%, due in monthly payments ranging from $6,490 to $1,238 with a single payment of $55,224 on October 1, 2014, secured by certain equipment of Wolf with a depreciated cost of $71,432 65,928 77,730


financial institution, principal and interest at 5.35%, with various monthly payments and due in monthly payments of $2,543 through January 30, 2013, and a single payment of $21,072 on January 30, 2015, secured by certain designated equipment of GSS, the note was paid in full during 2013 $ - $ 55,581

Notes payable to a financial institution, principal and interest at 7.50% due in monthly payments of $895 through November 1, 2014, and a single payment of $31,500 on November 1, secured by certain designated equipment with depreciated cost of $38,481 38,898 46,410

Note payable to a financial institution, principal and interest at 7.50%, due in monthly payments ranging from $1,752 to $713 and a single payment of $30,800 on June 20, 2014, secured by certain equipment of Wolf 33,856 40,060



financial institution, principal and inter-est at 7.50%, due in monthly payments ranging from $859 to $196 and a single payment of $19,950 on September 21 2016, secured by certain equipment of Wolf with a depreci-ated cost of $25,569 $ 21,854 $ 27,488

Note payable to a financial institution, principal and inter-est at 7.97%, due in monthly payments ranging from $989 to $875 and a single payment of $13,579 on July 20, 2014, secured by certain equipment of Wolf with a depreci-ated cost of $34,501, the note was paid in full during 2013 - 26,293

Note payable to a financial institution, principal and inter-est at 7.50%, due in monthly payments of $761 and a single payment of $14,650 on July 22, 2014, secured by certain equipment of Wolf with a depreciated cost of $18,833 20,946 26,602

Note payable to a finan-cial institution, principal and interest at 8.89%, due in monthly pay-ments of $1,254 through September 1 ,2014 and a single payment of $10,016 on October 1, 2014, secured by cer-tain equipment of Wolf $ 20,170 $ 32,781


financial institution, principal and inter-est at 8.48%, due in monthly payments ranging from $813 to $367 and a single payment of $4,500 on December 1, 2016, secured by certain equipment of Wolf with a depreciated cost of $13,216 15,804 24,018

Note payable to a financial institution, principal and inter-est at 7.50%, due in monthly payments ranging from $889 to $378 and a single pay-ment of $16,750 on June 20, 2014, secured by certain equipment of Wolf with a depreci-ated cost of $28,868, the note was paid in full during 2013 - 22,141

Total long-term debt 14,594,877 14,526,351Less current portion 3,336,955 3,232,767

Long-Term Debt $ 11,257,922 $ 11,293,584

There are covenants contained in the long-term debt agreements. The Company believes it is in compli-ance with these covenants.

Scheduled payment of principal payments on long-term debt is as follows:

2014 $ 3,336,9552015 1,936,8762016 1,532,2082017 1,233,9452018 1,189,534Thereafter 5,365,359

$ 14,594,877



13. Related Party Long-term Debt

Purchase Agreement

In January 2009, the Company executed an agree-ment to purchase the minority member’s interest in Goldbelt Raven, LLC. The general intention of the Parties was for the minority member Federal Systems, Inc. (FS) to receive 44% of the present value of the expected profit on Raven’s existing prime federal contract backlog, which consists of three prime con-tracts (“Existing Contracts.”) These Existing Contracts will potentially continue several years into the future. The Parties agreed to a structured payment of the Redemption Price because Raven did not have cash on hand to pay FS its entire share of expected fu-ture profit from the Existing Contracts, and because there was always uncertainty as to the actions the U.S. Government might take with respect to any con-tract.

The Redemption Price which is the net present value of 44% of applicable contracts carried to term dis-counted at 7.00%, was established at $4.5 million, and was set forth in a Promissory Note (“Note”). It may be adjusted at any time based on the actual profit expe-rience associated with the Existing Contracts, subject to a limitation that if the Federal Government takes any action which terminates or reduces the scope or profitability of the value of any of the Existing Con-tracts, the Note will be adjusted accordingly. There is a strict limitation on the adjustments to ensure that the Company does not take actions to reduce prof-itability through increasing overhead, G&A or other indirect costs in the control of the Company or Gold-belt. The indirect rates are benchmarked on profit-ability of the applicable contracts from fiscal years 2007 and 2008. However, if the Company generates new business or reduces costs which generates high-er than benchmarked profitability the Company will be entitled to receive 100% of the profit related to those changes. There are provisions in the Note to al-low FS to audit any adjustments to the Redemption Price, to challenge the same, and for the Parties to engage in a dispute resolution to settle any disagree-ments as to such adjustments. The Company has pro-vided a guaranty on the Note.

The Existing Contracts have been extended into fis-cal year 2015. The final amount of the Note will not be known until those contracts have been completed. The balance on the Note as of December 31, 2013 is $1,653,217. Based upon the current projected val-ue of the contracts, the Note will be paid in monthly payments of $61,632, including interest at 7% with a

maturity date no later than June 30, 2016. Scheduled principal payments on long-term debt are as follows for December 31:

2014 $ 644,2692015 686,7292016 322,219

$ 1,653,217

14. Income Taxes

Income tax expense (benefit) attributable to con-tinuing operations for the years ended December 31, 2013 and 2012 is as follows:

December 31, 2013

Current Deferred Total

Federal $ 82,580 $ - $ 82,580State 119,757 - 119,757

Total $ 202,337 $ - $ 202,337

December 31, 2013

Current Deferred Total

Federal $ 117,841 $ - $ 117,841State (78,060) - (78,060)

Total $ 39,781 $ - $ 39,781



Actual income tax expense (benefit) differs from “ex-pected” income taxes (calculated at the Federal statutory tax rate of 34%) attributable to continuing operations, for the years ended December 31 as fol-lows:

2013 2012

Computed “expected” tax expense $ 1,580,259 $ 1,943,362State income tax expense, net of federal effect 131,791 158,779Net operating losses (1,614,548) (2,302,171)Basis difference of joint ventures and subsidiaries 541,166 888,797Alternative minimum tax 82,580 117,841Depreciation (242,147) 130,278Other (276,764) (897,105)

$ 202,337 $ 39,781

The components of and changes in deferred tax as-sets and liabilities as of and for the years ended De-cember 31, follows:

2013 2012

Deferred tax as-sets and liabilities:

Net operating loss carryforward $ 15,547,370 $ 16,977,309Fixed assets (3,570,586) (3,338,817)ANCSA land 2,355,617 2,355,617Basis in LLC’s 2,003,537 1,441,344AMT credit carryforward 632,607 554,315Other 143,013 25,260

Net deferred tax asset 17,111,558 18,015,028Valuation allowance (12,041,996) (12,945,466)

Net Deferred Tax Asset $ 5,069,562 $ 5,069,562

A valuation allowance has been estimated by man-agement to reduce the deferred tax asset to the amount that is more likely than not to be realized based on estimated future taxable income and utili-zation of tax planning strategies. The valuation allow-ance relates primarily to net operating loss carryfor-wards.

The Company’s net operating loss carry forwards and the years of expiration are as follows:

Year Ended December 31, Federal State

2018 $ - $ 4,984,0002019 12,870,000 11,739,0002020 1,631,000 1,423,0002021 6,254,000 6,091,0002022 6,407,000 5,800,0002023 5,943,000 5,421,0002024 1,677,000 1,083,0002025 800,000 424,0002026 64,000 -

$ 35,646,000 $ 36,465,000

15. Pension Plan

The Company has 401(k) employee savings plans. The plans allow full time employees to become eligible to participate after completing 90 days of service. Under the plans, the Company at its discretion may match a percentage of participant contributions. The Company elected to match employee contributions of $905,494 in 2013 and $739,806 in 2012.


16. Gross Vs. Net Revenue

Gross activity reported at net includes supplies and equipment purchased where the Company acts as a purchasing agent. A summary of the gross ac-tivity for the years ended December 31, 2013 and 2012 are as follows:

2013 2012

Gross billings for goods $ 78,656,188 $ 65,573,626Less payments to vendors 73,928,595 61,020,135

$ 4,727,593 $ 4,553,491

17. Concentration Risks and Uncertainties

The Company received substantially all of its con-tracting revenue from contracted government services from the U.S. Government. Changes in the U.S. Government spending could have a positive or negative impact on the Company.

18. Related Party Transactions

The Company’s contracted government service businesses have various agreements with minority owners and related subcontractors that provided for fees for services and participation in profits of the subsidiaries. The subsidiaries paid minority own-ers and related entities approximately $1.3 million and $7.4 million for subcontracting and admin-istrative services in 2013 and 2012, respectively. Amounts payable to related parties was approxi-mately $3.2 million and $4.9 million at December 31, 2013 and 2012, respectively.

19. Discontinued Operations

On October 4, 2013, one of the Company’s sub-sidiaries sold all property and equipment located at Ames Research Center - Moffett Field, Califor-nia. As a result of the sale, the Subsidiary record-ed a loss on sale of property and equipment for $246,928. The Subsidiary has elected not to pres-ent the results from operations of Moffett Field for the period beginning January 1, 2012, through Oc-

tober 4, 2013, the effective date of the transfer of ownership as continuing operations. A (loss) gain of ($414,170) and $866 has been presented for the years ended December 31, 2013 and 2012, respec-tively. The write off of the activities has been pre-sented in the Consolidated Statements of Opera-tions as gain (loss) from discontinued operations.

20. Commitments and Contingencies

Contract Audits

The Company incurred various costs on U.S. Gov-ernment contracts in 2013 and 2012 that are sub-ject to direct reimbursement from the U.S. Govern-ment. The U.S. Government has the right to audit these costs. Disallowed costs, if any, would have to be reimbursed to the U.S. Government. Manage-ment believes that disallowed costs, if any, would be insignificant to the Company. At this time no material adjustments or audit issues are outstand-ing on U.S. Government contracts.

Claims

In the ordinary course of business, the Company may be involved in legal actions, claims, employee matters, and disputes incidental to its operations. While the ultimate results of these items cannot be predicted with certainty, management does not expect at this time the resolution of them to have a material adverse effect on the Company’s finan-cial position, results of operations or its liquidity.

2013 Goldbelt Annual Report - Page 342013 Goldbelt Annual Report - Page 34

Facility & Engineering Group

Facility Support Services, LLCJohn P. Mroz, President5475 William Flynn HighwayGibsonia, PA 15044(724) 502-4394

Goldbelt Eagle, LLCJohn Pritz, President13900 Lincoln Park Drive, Ste 310Herndon, VA 20171(215) 534-5819

Goldbelt Falcon, LLCMichael Blume, President860 Greenbrier Circle, Ste 410Chesapeake, VA 23320(757) 873-7647 ext. 125

Goldbelt Hawk, LLCBruce Swagler, President740 Thimble Shoals Blvd, Ste GNewport News, VA 23606(757) 874-1067

Goldbelt Speciality Services, LLCJohn Pritz, President13900 Lincoln Park Drive, Ste 310Herndon, VA 20171(215) 534-5819

Medical & Defense Services Group

CP Leasing, LLCTodd Kelsey, General Manager5500 Cherokee Avenue, Ste 100Alexandria, VA 22312(703) 584-8889 ext. 252

Goldbelt Glacier Health Services, LLCElliott “Chuck” Wimberly, President13900 Lincoln Park Dr, Ste 310Herndon, VA 20171(703) 871-2091 ext. 3113

Goldbelt Raven, LLCElliott “Chuck” Wimberly, President13900 Lincoln Park Dr, Ste 310Herndon, VA 20171(703) 871-2091 ext. 3113

Goldbelt Wolf, LLCJames Jones, President5500 Cherokee Ave, Ste 100Alexandria, VA 22312(703) 584-8889 ext. 251

Lifesource Biomedical, LLCSteven Tew, General Manager13900 Lincoln Park Dr, Ste 310Herndon, VA 20171(412) 290-8392

Alaska Operation Companies

CP Marine, LLCJeff White, General Manager76 Egan DroveJuneau, AK 99801(907) 463-8811

Goldbelt Security, LLCBlair Seward, General Manager8585 Old Dairy Road, Ste 201Juneau, AK 99801(907) 790-1435

Goldbelt Hotel, LLCRon Hauck, General Manager51 Egan DriveJuneau, AK 99801(907) 586-6900

Goldbelt Transportation, LLCJeff White, General Manager76 Egan Drive, Ste 100Juneau, AK 99801(907) 463-8811

Mt. Roberts Tramway, LLCJim Duncan, General Manager490 South Franklin StreetJuneau, AK 99801(907) 463-3412

Technical Services Group

Goldbelt C6, LLCMichael Bosley, President860 Greenbrier Circle, Suite 410Chesapeake, VA 23320(757) 873-7647

Nisga’a Data Systems, LLCFrank Watson, President13900 Lincoln Park Dr, Ste 310Herndon, VA 20171(571) 313-5841

Peregrine Technical Solutions, LLCEdwin “Leigh” Armistead, President114 Ballard Street, PO Box 520Yorktown, VA 23690(757) 581-9550

Goldbelt Subsidiaries

Corporate Employees (Not Pictured)

Angela Amaya, Staff Accountant - Herndon

Elena Bringham, Human Resource Generalist - Herndon

Angel Brown, Accounting Technician - Juneau

Navy Chhour, Senior Accountant - Herndon

Barbara Duncan, Accountant - Juneau

Jamie Johnson, Human Resource Coordinator - Herndon

Ryan Kish, Senior Accountant - Herndon

Joshua L’Etoile, Staff Accountant - Herndon

Montee McGowen, Human Resource Specialist - Herndon

Patrick Marshall, Controller - Herndon

Wayne Mercer, Recruiter - Herndon

Susan Mochinski, Human Resource Director - Herndon

Nayer Pourkiani, Staff Accountant - Herndon

Jennifer Reid, Staff Accountant - Herndon

Jeri Roehl, Accountant - Juneau

Kimberly Rucinski, Staff Accountant - Herndon

Robert Tino, Senior Accountant - Herndon

Terrence Yu, Financial Analyst - Herndon

Samantha Wong, Staff Accountant - Herndon


2013 Annual Report produced by Goldbelt’s Corporate Communications Department. Copyright © Goldbelt, Incorporated, 2014. All rights reserved.

FRONT COVER: Hobart Bay Sunset Layout and Design by Tesla Cox, Corporate Communications & Shareholder Services Assistant. Eagle/Raven design by Shareholder Nick Vonda, Copyright © Goldbelt, Incorporated, 2014. All Rights Reserved.

BACK COVER: Goldbelt Timeline Layout and Design by Tesla Cox, Corporate Communications & Shareholder Services Assistant. Alaska map photo courtesy of iStockphoto. Used with permission.

Acknowledgements


3075 Vinta

ge Boulevard

, Suite 200Junea

u, Ala

ska 99801

Ma

in: (907) 790-4990Toll Free: (800) 770-5866Fa

x: (907) 790-4999

ww

w.gold

belt.com

1974 - Goldbelt is incorporated &

the journey begins...

1984

1994

2004

2014 - The journey continues.

–1975 - First land selections are m

ade

–1979 - H

obart Bay land exchange agreement is signed

–1981 - Land acquired at Echo C

ove, Hidden Valley, and on D

ouglas Island

–1982 - First H

obart Bay logs are sold in Japan and Korea

–1987 - First dividends paid to shareholders at $12.50 per share

–1990 - G

oldbelt’s assets top $100 million

Shareholders receive $160.03 per share distribution of NO

L funds - 1994 –Seadrom

e building and property is purchased - 1995 –

Shareholders approve special distribution of Elders’ Stock - 1997 –G

oldbelt Hotel and G

oldbelt Transportation are purchased - 1997 –C

P Leasing receives SBA’s 8(a) Business Developm

ent Program certification - 1999 –

Career developm

ent program accepts first inten applicantions - 2010 –

Mt. Roberts Tram

way is com

pleted and celebrates opening day - 1996 –

Goldbelt H

otel undergoes major renovations - 2013 –

Goldbelt H

eritage begins awarding educational scholarships - 2008 –

Goldbelt Security is established - 2006 –

First geoducks are planted at Hobart Bay - 2012 –

Goal set of reaching $500 m

illion in sales in 5 years - 2013 –

–1989 - Investm

ents begin in real estate

2013 annual report portrait 2 - amazon...

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